HPCL steps up pressure for more Mumbai High crude

Vol 7, PW 19 (03 Dec 03) Midstream & Downstream

Hindustan Petroleum is moving fast to ensure it gets a higher allocation of locally produced crude from Mumbai High before the government begins sharing out domestic production among the countrys refiners for the next financial year.

In October, HPCL wrote to the oil ministry with a detailed argument on why it should get more locally produced crude oil during 2004-05. We want a minimum supply of 6m t/y of low sulphur crude oil next year onwards as against the present supply of 4.35m t/y, argues HPCL.

Central to HPCLs case is that Indian Oil and Bharat Petroleum are allocated higher volumes of locally produced crude when they dont need it. Bharat Petroleums refineries have similar refining capacities and infrastructure limitations as us but they get 9.5m t/y, says a source.

IOCs refineries get 12.9m t/y even though they have better infrastructure which enables them to keep freight costs low by importing crude in very large crude carriers. HPCL argues that it makes more sense for IOC to import low sulphur crude than use locally produced low sulphur crude.

Diverting 1m t/y Mumbai High crude from IOCs Vadinar-fed refineries to our Mumbai refinery will lead to freight savings of Rs80cr a year and Rs25cr a year for our Vizag refinery. HPCL complains that it is forced to divert much of the Mumbai High crude meant for its Vizag refinery to its Mumbai refinery because it doesnt have enough storage space to accommodate imports.

This in turn forces Vizag to import lower quality crude from abroad, pushing up costs. Sulphur dioxide emission limits for Vizag refinery are now 11.5 tonnes per day, writes HPCL.

As imported low sulphur crude has a higher sulphur content than domestic low sulphur crude, this limit will be crossed, forcing us to cut (Vizag) refinery throughput. HPCL believes imported low sulphur crude could corrode Vizags refinery equipment.

Finally HPCL reminds the government that Vizag is expecting to receive 2.7m tonnes of Mumbai High crude and that, if even a part of this quantity has to be substituted with imported crude, well have to make additional investments in a diesel hydrotreater and other equipment.